Hong Kong Recession Risk May Increase on Exports, Tsang Says

Photographer: Jerome Favre/Bloomberg

Two International Finance Center (IFC), center right, stands in the central business district of Hong Kong, China. Close

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Photographer: Jerome Favre/Bloomberg

Two International Finance Center (IFC), center right, stands in the central business district of Hong Kong, China.

Hong Kong’s risk of a “technical recession” may increase after declines in exports and a slowdown in retail sales, Financial Secretary John Tsang said.

“We are unable to escape the impact of the European debt crisis,” Tsang wrote on his blog yesterday in Chinese. He didn’t give a forecast for third-quarter gross domestic product.

Hong Kong’s economy shrank 0.1 percent in the second quarter from the previous three months as the sovereign debt crisis in Europe capped export demand. China’s slowdown is dragging on trade, weighing on confidence and encouraging the million of mainlanders who visit each month to spend less on luxury goods.

The benchmark Hang Seng Index (HSI), down about 10 percent from this year’s high in February, was little changed as of 10:19 a.m. local time. Hong Kong’s retail sales grew in July at the slowest pace since the global financial crisis. The city’s exports fell 3.5 percent from a year earlier.

A shrinking economy would add to challenges for Chief Executive Leung Chun-ying, who took office July 1 and faces public concern over housing costs, the gap between rich and poor and the mainland government’s role in education. Thousands of residents demonstrated on Sept. 1 to protest a planned education program they say will be Communist Party propaganda.

Retail figures are “worrying” and it will be difficult for exports to return to growth in the short term, Tsang said, adding that the city also faces a risk of rising unemployment.

Donna Kwok, an economist at HSBC Holdings Plc in Hong Kong, said Aug. 30 that visitors from China are paring spending on luxury goods and consumer confidence has weakened, “weighed down by continued turbulence in global financial markets.”

To contact the reporter on this story: Simon Lee in Hong Kong at slee650@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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